Yevhenii Usenko, Massachusetts Institute of Technology
Abstract: Recent work documents widespread depositor stickiness, yet deposit flows respond strongly to monetary policy. Using data on U.S. commercial banks since 1975, I show that the deposits channel operates primarily through a small number of large, responsive depositors who account for a substantial share of bank funding. I document that rates on large deposits are significantly more sensitive to policy rates—with pass-through more than double that of small deposits. Still, large deposits flow out more strongly in response to monetary policy shocks and account for essentially all aggregate deposit outflows. These patterns are not explained by local deposit market concentration. I show that the outflows of large deposits lead to lower lending, particularly at small banks. My results suggest that as the share of large, responsive deposits rises, the deposits channel is likely to become stronger.
Abstract: Depositors’ access to stocks and bonds (market-priced savings, or MPS) shapes deposit pricing and monetary policy transmission. Using Danish administrative data linking every deposit account to each depositor’s complete financial portfolio, we show that MPS holders receive 8.4 percentage points higher pass-through of policy rate changes than demographically identical non-holders at the same bank in the same year. This differential operates within existing accounts rather than through account opening or closing. Despite this higher pass-through, MPS holders reduce deposits 3.4 percentage points more per 100 basis point policy rate increase. These outflows propagate to credit supply, with high-MPS banks reducing lending 1.5 percentage points more per 100 basis points of tightening. Evidence from 175 euro area banks confirms that competition from equities and bonds constrains banks’ deposit market power beyond traditional concentration measures.
